For the first subperiod the trading rules show almost no statistically significant forecasting power when applied to the CSCE series. Most t-ratios stay within the critical values. The percentage of strategies that perform badly is even larger than the percentage of strategies that perform well. For example 24.17% of all strategies generate a significantly negative mean excess return. For the LIFFE series the results are totally different. All subsets of trading rules show some forecasting power. 34.52% of all strategies generate a significantly positive mean excess return. For 26.73% of the strategies the mean return of the data series during buy days is significantly positive, for 39.47% of the strategies the mean return during sell days is significantly negative and for 46.65% of the strategies the Buy-Sell difference is significantly positive. The percentage of strategies that performs statistically badly is small. For 5.87% of the strategies the mean excess return is significantly negative. Hence, for the LIFFE series the trading rules show economic as well as statistically significant forecasting power in the first subperiod.
The second subperiod is characterized by a long term downward trend with short term upward corrections in both cocoa series. Economically the strategies behave quite well in the second subperiod, but the statistical significance of the mean excess return of the strategies is very poor (CSCE: 1.85%>tcrit; LIFFE 6.31%>tcrit). Hence the economic significance found is not statistically significant. All subsets of trading rules show a significantly negative mean return of the data series during sell days (CSCE: 44.57%<-tcrit; LIFFE: 54.62%<-tcrit), which is in line with the downward trend. The upward corrections are not predicted well by the strategies, and for many trading rules the mean return of the data series during buy days is even significantly negative (CSCE: 26.55%<-tcrit; LIFFE: 31.96%<-tcrit). The results found for the second subperiod are in line with the advices of technical analysts only to trade in the direction of the main trend and not reverse the position in the market until there is enough weight of evidence that the trend has reversed. Apparently, the short term upward corrections did not last long enough to be predictable or profitable.
The third subperiod is characterized by upward and downward trends in prices. The trading rules show no economic significance for this period and neither do they show statistical forecasting significance. 29.25% of the strategies applied to the LIFFE series generated a strictly positive excess return, but only for 2.13% of the strategies the mean excess return is significantly positive. For the CSCE series even 32.26% of the strategies generate a significantly negative mean excess return. If there was any predictability in the data it has disappeared in the third subperiod.